Daily Report 260815 2015-08-26
Macro Economy
Yesterday US stock market ended low, price dived in the late market which fell the mid market increased scope. S&P 500 index ended down 25.6 point or 1.35%, to 1867.61 point. Yesterday data revealed that, US June FHFA housing price index increased 0.2% on monthly basis, lower than estimated 0.4%, increased 5.6% on yearly basis. June Standard & Poor's Case-Shiller twenty cities housing price index increased 5% on yearly basis; July new housing sales volume annualized rate was 507,000 houses, increased 5.4% on monthly basis. Markit US August service industry PMI initial volume decreased from July 55.7 to 55.2. San Francisco Federal Reserve Bank reported, US actual inflation in first quarter probably was lower than published data and, economy growth speed was faster than published; Fed should be cautious at it; synthesizes aims as employment and stabilized price, the exceed actual inflation data was not likely lead to Fed interest rate raise soon. Overall, real estate market was relatively strong but, there was no huge increasing on manufacturing industry; prior data revealed that, sluggish inflation would weaken the conditions of Fed interest rate raise in September.  
In domestic, CPB declared to reduce 25 base point of benchmark loan and deposit rate from 26 August and, reduce 50 base point of deposit reserve ratio from 6 September. Meanwhile, floating ceiling on over one-year deposit rate will be released. The central bank experts indicated, economic base in China was not solid, reduction of interest and reserves this time did not represent monetary policy had changed; keynote of monetary policy would maintain sound and neutral. But matter of fact, after this interest reduction, “sound monetary policy” was not mentioned when answering journalists’ questions. This reserve reduction was largely in line with estimation and, earlier than we predicted; it might signify boosting market confidence from advancing enacted measures after recent stock market collapse. Historically, rally from interest and reserve reduction was hard to last long; hence investors shall be cautious at the effecting on stock market. In addition, it is predicted that reserve reduction would bring over RMB 670 billion liquidity to market, tightened liquidity from capital outflow recently shall be covered and, it shall be helpful on the real economy running. Pay attention on latter data, it is still possibly further reducing reserve if any disadvantaged fluctuation.
 
 
Stock Index
Yesterday stock index further falling, large-scale of shares was downed to the limit. Except for household appliances, bank, food and beverage down at 5%, other sectors were downed to the limit. Prior concepts were totally denied and shattered in current market. The concept from CSF was lacked of trust; state-owned enterprises reform was discouraged; other military industries also felt overvaluation; bad loans concerns from bank sector were increasing. Nation had quitted rescuing market which tally with prior CSRC expression that would not rescue points. Nation may pay more attention on raising real economy and, market will not have illusion on stock market represented Nation's prosperity. We regarded that interest and reserve reduced was for the real economy and released on stock market slumped timing for relieving the panic mindset. Intraday may rally, market will contend at 3000 point but it cannot rally back; market is likely to maintain less than 3000 point.
 
 
Copper
Tuesday domestic and overseas copper price continued rallying but, copper price rally momentum was insufficiently relative to intraday news. PBOC announced to reduce interest and reserve fund, directional reduce reserve fund; particularly, would started reducing 0.25% interest from 26 August; 0.5% reserve fund from 6 September and, would extra reduce 0.5% reserve fund to rural financial institution; 0.3% reserve reducing in financial lease corporation, automobile finance corporation. This is the second time for both interest and reserve fund reduced at the same time since June, which indicated that recent economy weaken and stock market collapse had caused attention from central bank. Tuesday reserve fund reduction boosted European stock market, yet US stock market still plunged. Considering of Tuesday commodities market reaction was weak, market still lacked of confidence.
On fundamental side, LME spots premium extended to recent high point at $28; inventories decreased 650 tons. Domestic spots were discount RMB 50 to premium RMB 10, trading volume was improved by entirety market discount but, downstream overall in strong observing momentum. Copper price continued dropping, lacked of qualified rally in mid market which made copper price stagnant and dropped; possibility of rally in the near future increased. LME resistance was resistance line $5120; in domestic, November copper resistance was RMB 40000. We recommend observing on operation and waiting for the sign of rally trend ending.
 
 
Soybean
Soybean rallied in night session and, was boosted from PBOC interest and reserve reduction. Soybean spots in Northeast tended weaken out of stabilize; under the impact of upcoming new grain, hammer on spots further raising in a short time increased but, down scope in short time was estimated to be limited.
Soybean meal spots was weaken out of stabilize, partial region reduced price at RMB10-30/ton; overseas market dropped made domestic oil plant lowered quotation. Market still shown tightened North inventories, huge inventories in south China and East China; oil plants in north plainly supported price and trading was in good performance, most oil plants were mainly executing prior contracts. Along with port arrival amount increasing, hammer on soybean supply side still existed. We recommend stay in shorten mindset on operation.
 
 
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